Economic Overview

Denmark's industrialized market economy depends on imported raw materials and foreign trade. Within the European Union, Denmark advocates a liberal trade policy. Its standard of living is among the highest in the world, and the Danes devote about 1% of the gross national product (GNP) towards foreign aid in less developed countries.

Denmark is a net exporter of food and energy, and its principal exports are machinery, instruments, and food products. The United States is Denmark's largest non-European trading partner, accounting for about 7% of total Danish merchandise trade. Aircraft, computers, machinery, and instruments are among the major U.S. exports to Denmark. Among major Danish exports to the United States are industrial machinery, chemical products, furniture, pharmaceuticals, canned ham and pork, windmills, and plastic toy blocks (Lego). In addition, Denmark has a significant services trade with the U.S., a major share of it stemming from Danish-controlled ships engaged in container traffic to and from the United States (notably by Maersk-SeaLand). There are well over 400 U.S.-owned companies in Denmark.

The Danish economy is fundamentally strong. Since the mid-1990s, economic growth rates have averaged close to 3%, the formerly high official unemployment rate stands at 4.4%, and public finances have been in surplus. Except for one year--1998--Denmark since 1989 has had comfortable balance-of-payments current account surpluses, in 2012 corresponding to 5.5% of GDP. According to a 2013 report by Eurostat, Danes pay the highest taxes among all EU countries, with tax revenues accounting for nearly 48% of economic output. Still, Denmark’s current ruling coalition, led by the Social Democratic Party, announced plans in February 2013 to lower the overall corporate tax rate from 25% to 22%.

Denmark has maintained a stable currency policy since the early 1980s, formerly with the krone linked to the deutschmark and since January 1, 1999, to the euro. Denmark meets, and even exceeds, the economic convergence criteria for participating in the third phase (a common European currency--the euro) of the European Monetary Union (EMU). Danes have consistently rejected adoption of the euro, and a December 2012 poll conducted by Danske Bank showed that 70 percent of Danes preferred to keep the krone.

Danes are generally proud of their welfare safety net, which ensures that all Danes receive basic health care and can avoid real poverty. However, the number of working-age Danes relying primarily on government transfer payments accounts for roughly 24% of the working-age population. Although this number has been reduced in recent years, the heavy load of government transfer payments burdens other parts of the system. Health care, other than for acute problems, and care for the elderly and children have particularly suffered, while taxes remain at a painful level. About one-quarter of the labor force is employed in the public sector.